REGIONAL BENCHMARKING OF LARGE WATER SUPPLY AND SANITATION UTILITIES 2015/2016 REPORT

Transcription

1 REGIONAL BENCHMARKING OF LARGE WATER SUPPLY AND SANITATION UTILITIES 2015/2016 REPORT June, 2017

2 TABLE OF CONTENTS LIST OF FIGURES OF TABLES ii FOREWORD iii ACKNOWLEDGEMENTS iv ABBREVIATIONS/ACRONYMS v EXECUTIVE SUMMARY vi CHAPTER 1. OVERVIEW OF ESAWAS REGULATORS ASSOCIATION Background Objectives and Members of ESAWAS Implementation of ESAWAS Strategic Plan CHAPTER 2. REGIONAL BENCHMARKING FRAMEWORK Rationale for regional benchmarking Benchmarking Tools Benchmarks Key Performance Indicators (KPIs) CHAPTER 3. PERFORMANCE ANALYSIS Reporting Period Overview of Benchmarked Utilities Performance Boundaries Performance Analysis Summary Analysis CHAPTER 4.CONCLUSIONS Annex 1. Common KPIs with benchmarks set by each regulator Annex 2. Detailed Profiles of Utilities Annex 3. Water Utility Performance Index (WUPI) Annex 4. Composition of ESAWAS Technical Committee i

3 LIST OF FIGURES AND TABLES FIGURES Chart 1: Water Supply Service Coverage Chart 2: Sewerage Service Coverage Chart 3: Water Quality Compliance Chart 4: Hours of Water Supply Chart 5: WUPI - Quality of Services Chart 6: O&M Cost Coverage by Billing Chart 7: Collection Efficiency Chart 8: Staff Cost in relation to O&M costs Chart 9: WUPI Economic Efficiency Chart 10: Staff per 1,000 Water and Sewer Connections Chart 11: Metering Ratio Chart 12: Non Revenue Water Chart 13: WUPI Operational Sustainability Chart 14: Overall WUPI TABLES Table 1: Overview of ESAWAS Members Table 2: Implementation Performance for 2016 Strategic Plan Activities Table 3: Regional Benchmarking KPIs and Performance Measurements Table 4: General Profile of Benchmarked Utilities Table 5: Key Background Data on Benchmarked Utilities Table 6: KPIs and Performance Boundaries Table 7: Domestic Water Connections per Utility Table 8: Sewerage Connections per Utility Table 9: Comparison of Residential Water Bill and Cost of Connection Table 10: Total Staff per Utility Table 11: Non Revenue Water in terms of length of Network and Connections Table 12: Summary of Utility Performance ii

4 FOREWORD This third regional benchmarking report has seen the inclusion of the water supply and sanitation Utilities in Zanzibar and Uganda, bringing the total reported Utilities to eight, from six since inception of the report. This is in line with the Strategic Plan objectives of the Eastern and Southern Africa Water and Sanitation (ESAWAS) Regulators Association to extend the exercise to the rest of the region and thereby spur improvements in water supply and sanitation service delivery through comparative reporting. The dissemination of the 2015 report during the 10 th ESAWAS annual general conference included the sharing of experiences from the benchmarked Utilities in areas of good performance. The report was further disseminated by presentations at the 18 th African Water Association (AfWA) Conference, the International Water Association (IWA) 3 rd International Water Regulators Forum and the 13 th African Forum for Utility Regulators (AFUR) Conference. It is the intention of ESAWAS to continue raising the profile of the report as a useful tool to gauge the performance of the single or largest Utility in a country, in order to formulate appropriate interventions and regulations that incentivise good performance. At the close of the Millennium Development Goals (MDGs), the UN 2015 Report shows that the ratio of the world population with access to improved drinking water supply increased from 76% in 1990 to 91% and access to improved sanitary facilities was extended from 54% to 68%. However, over 80% of wastewater is still discharged untreated into rivers, lakes and oceans and drinking water supply is contaminated for lack of sewage systems. About 1.8 billion people remain without access to clean drinking water. This third regional benchmarking report is in tandem with the status of the MDGs report. As the world gains tract in transitioning to the Sustainable Development Goals, effective regulation will play a key role in incorporating a holistic approach to implementing government policy and fostering improvements in water supply and sanitation service delivery. iii

5 ACKNOWLEDGEMENTS The Eastern and Southern Africa Water and Sanitation (ESAWAS) Regulators Association wishes to acknowledge the dedication of its Member institutions to support the regional benchmarking exercise and successfully produce the third annual regional benchmarking report in a row. In addition, Members have included the outputs of this exercise in their respective country performance reports which have further enhanced the value of this report. Of special mention are the Zanzibar Utilities Regulatory Authority (ZURA) of Zanzibar and the Water Utility Regulation Department (WURD) of Uganda for their keen interest and first-time participation in the benchmarking exercise. This is in fulfilment of ESAWAS s intention to extend the exercise to the rest of the region. ESAWAS continually thanks the water supply and sanitation Utilities benchmarked in this report for lauding the usefulness of the report, providing feedback and their full participation during its dissemination. It remains the aim of ESAWAS that this report will continue to spur performance among our WSS Utilities to the benefit of the citizenry. iv

6 ABBREVIATIONS/ACRONYMS AdeM CRA DAWASCO ESAWAS EWURA IBNET KPI LWSC LEWA NCW&SC NWASCO NWSC QoSSS RURA SDGs UN WASAC WASCO WASREB WSS WUPI WURD ZAWA ZURA Águas da Região de Maputo Conselho de Regulação de Aguas Dar es Salaam Water and Sewerage Corporation Eastern and Southern Africa Water and Sanitation Energy and Water Utilities Regulatory Authority International Benchmarking Network Key Performance Indicators Lusaka Water and Sewerage Company Lesotho Electricity and Water Authority Nairobi City Water and Sewerage Company National Water Supply and Sanitation Council National Water and Sewerage Corporation Quality of Supply and Service Standards Rwanda Utilities Regulatory Authority Sustainable Development Goals United Nations Water and Sanitation Corporation Water and Sewerage Company Water Services Regulatory Board Water Supply and Sanitation Water Utility Performance Index Water Utility Regulation Department Zanzibar Water Authority Zanzibar Utilities Regulatory Authority v

7 EXECUTIVE SUMMARY This third benchmarking report presents an analysis of the performance of large water and sewerage Utilities in eight countries of the Eastern and Southern African region for the period 2015/2016. The benchmarked Utilities selected as either the single or largest Utility in the country were: Nairobi City Water and Sewerage Company (NCW&SC) of Kenya; Dar Es Salaam Water and Sewerage Corporation (DAWASCO) of Tanzania; Lusaka Water and Sewerage Company (LWSC) of Zambia; Águas da Região de Maputo (AdeM) of Mozambique; Water and Sanitation Corporation Ltd (WASAC) of Rwanda; Water and Sewerage Company (WASCO) of Lesotho, National Water and Sewerage Corporation (NWSC) of Uganda and Zanzibar Water Authority (ZAWA) of Zanzibar. The analysis of the performance was done against ten key performance indicators and benchmarks defined by ESAWAS. The key performance indicators (KPIs) were grouped according to similarity in the components of Quality of Service, Economic Efficiency and Operational Sustainability. Finally the performance of the Utilities was ranked using an integrated measurement of performance in the aforementioned components, called the Water Utility Performance Index. The main results show that the best performing KPIs were Water Quality, Hours of Supply, O& M Cost Coverage and Staff/1,000 W&S Connections while the worst performing KPIs continued to be Sewerage Coverage and NRW. The report recommends an urgent and critical need for Governments to direct investments to extending service coverage and hours of supply if the Sustainable Development Goals (SDGs) are to be met. Further, Utilities are implored upon to devise innovations and strategies to contain costs, reduce water losses and improve collections for financial viability. This report is organised as follows: the first section gives an overview of the ESAWAS Regulators Association; the second section describes the regional benchmarking framework; the third section presents the comparative performance analysis and the final section of the report discusses the main conclusions and recommendations of the benchmarking exercise. vi

8 CHAPTER 1. OVERVIEW OF ESAWAS REGULATORS ASSOCIATION 1.1 BACKGROUND Access to safe drinking water and adequate sanitation remains a key developmental agenda for governments world-over. According to the UN Sustainable Development Goals (SDGs), Water and sanitation are at the very core of sustainable development, critical to the survival of people and the planet. It is in cognisance of the foregoing that water sector reforms initiated by most governments in the Eastern and Southern African region in the last 20 years, focussed on improving the provision of water supply and sanitation (WSS) services. The water sector reforms also emphasised the need for stronger institutions to improve WSS service delivery. Hence, autonomous regulatory authorities have been established to ensure improved, affordable and efficient service delivery while protecting consumers against potential abuse of monopoly power (limited scope for competition/choice by customers). The goal of regulating WSS services is thus to improve and maximise the well-being of the whole population. Regulators aim to ensure efficient, affordable, reliable and quality services while balancing the commercial interest (sustainability) with that of social consideration. Regulators are often no one s child with a delicate balancing act. However, in recognising the need for collaboration in the development of an effective WSS regulatory framework, the Eastern and Southern Africa Water and Sanitation (ESAWAS) Regulators Association was formed in 2007, to exchange experiences and knowledge on WSS regulation through regional cooperation on issues of mutual concern and interest. The ESAWAS Regulators Association is registered under the Societies Act Cap 119 of the Laws of Zambia and is governed by a Constitution ratified among the members. 1.2 OBJECTIVES AND MEMBERS OF ESAWAS The ESAWAS Regulators Association seeks to enhance the regulatory capacity of members to deliver quality and effective regulation to achieve public policy objectives through cooperation and mutual assistance. The objectives of the ESAWAS Regulators Association as stated in its Constitution are: a) Capacity Building and Information Sharing Facilitate information sharing and skills training at national, regional and international level to enhance the capacity of members in WSS regulation; b) Regional Regulatory Co-operation Identify and encourage the adoption of best practices to improve the effectiveness of WSS regulation in the region. 1

9 The ESAWAS Regulators Association is currently composed of eight members that are: Water Services Regulatory Board (WASREB) of Kenya; the Water Regulatory Council (CRA) of Mozambique; the Rwanda Utilities Regulatory Authority (RURA) of Rwanda; the Energy and Water Utilities Regulatory Authority (EWURA) of Tanzania; the National Water Supply and Sanitation Council (NWASCO) of Zambia; the Lesotho Electricity and Water Authority (LEWA) of Lesotho; the Agency for Regulation of Electricity, Potable Water and Mines (AREEM) of Burundi and the Zanzibar Utilities Regulatory Authority (ZURA) of Zanzibar. The overview of the regulators is given in Table 1. Table 1: Overview of ESAWAS Members Regulator Established by Year begun operations Number of regulated Urban WSS Utilities 1 National Water Supply and Sanitation Council (NWASCO), Zambia Water Supply and Sanitation Act No. 28 of Water Regulatory Council (CRA), Mozambique Decree No. 74 of Water Services Regulatory Board (WASREB), Kenya Water Act of Rwanda Utilities Regulatory Authority (RURA), Rwanda Law No. 39 of Energy and Water Utilities Regulatory Authority (EWURA), Tanzania Cap 414 of Lesotho Electricity and Water Authority (LEWA), Lesotho LEA Act of 2002, LEA Amendment Act of Agency for Regulation of Electricity, Potable Water and Mines (AREEM), Burundi Decree No. 100/320 of Zanzibar Utilities Regulatory Authority (ZURA), Zanzibar Act No. 7/ The regulators have generally been mandated to undertake both economic and technical regulation of WSS service provision to ensure a balance between the quality of the service, the interests of consumers and the financial sustainability of the providers. 2

10 For effective regulation, a number of instruments and tools have been put in place and generally include: Licensing: All WSS providers are required to operate under a license issued by the regulator except in Mozambique where the regulator, CRA, signs a regulatory agreement/contract with the provider that defines the regulatory framework. Development and Enforcement of Guidelines, Regulations, Rules and Standards: Various guidelines, regulations, rules and standards have been developed and enforced to ensure compliance to the governing water supply and sanitation legislation. Some key regulations, guidelines and standards include: Minimum Service Level, Business Planning, Corporate Governance, Reporting and Quality of Supply and Service Standards (QoSSS). Tariff Setting: All WSS providers are required to submit tariff applications to the regulator for analysis and approval. Performance Monitoring and Quality Control: The regulators undertake regular inspections of utility infrastructure and operations. Areas of non-compliance are addressed through written directives and orders. Sector Performance Reporting and Information Dissemination: The regulators have in place systems for data collection on the performance of the Utilities that is used for sector reporting. All the regulators produce annual reports on the performance of the sector which is published and disseminated to the public. 1.3 IMPLEMENTATION OF ESAWAS STRATEGIC PLAN ESAWAS begun the implementation of its second Strategic Plan for the period which is anchored on three strategic objectives as follows: i. Strengthen regulatory capacity among Members and within the region ii. iii. Facilitate experience and knowledge transfer Improve operations of ESAWAS Regulators Association On overall, about 85% of the Strategic Plan was executed successfully. Major activities undertaken in the year under the three objectives and key focus areas were as outlined in Table 2. 3

11 Table 2: Implementation Performance for 2016 Strategic Plan activities OBJECTIVE 1: STRENGTHEN REGULATORY CAPACITY AMONG MEMBERS AND WITHIN THE REGION Key Focus Area Performance Undertake Peer The fourth regulatory Peer Review was successfully held for CRA, Review of Regulators Mozambique from 22 nd -26 th August All Members participated in the Peer Review with a total team of 14. Major findings were centred on the need to review legislation to strengthen regulation of operators, improve sanitation regulation and enhance consumer participation. The team lauded the strong approach to decentralised regulation and enhanced benchmarking framework. Extend benchmarking exercise for large utilities in the region Provide support to WSS regulators newly established or under formation in the region The second regional benchmarking report was published by end of June 2016 with support from GIZ-Tanzania through EWURA. The main results from the benchmarking analysis highlighted a performance disparity by the Utilities among the components of Quality of Service, Economic Efficiency and Operational Sustainability. A number of the Utilities performed well in one component and poorly in one or two of the others. In overall, the report shows that the best performing KPIs were Staff/1000 Connections and Collection Efficiency while the worst performing KPIs were O&M Cost Coverage and NRW. AREEM, Burundi as a newly formed regulator and member of ESAWAS was supported to participate in the regulatory Peer Review of CRA in order to gain in-depth hands-on knowledge of regulatory systems and practices through peer exchanges. 4

12 Table 2 cont d: Implementation Performance for 2016 Strategic Plan activities OBJECTIVE 2: FACILITATE EXPERIENCE AND KNOWLEDGE TRANSFER Key Focus Area Performance Document and share Good practices in tariff setting were documented and shared. good practices in regulation Undertake technical regulatory exchange programmes Establish/Strengthen partnership with other WSS sector associations A Technical regulatory exchange meeting on Tariff Setting was successfully held in Lusaka, Zambia from th June, The participants were composed of staff directly handling tariff setting. The meeting proposed that an ESAWAS handbook for tariff setting be developed that will detail the good practices documented. This will be undertaken under the ambit of the ESAWAS Technical Committee. AFUR participated and presented at the ESAWAS 10 th AGM at the invitation of ESAWAS. WHO-Regnet gave a focussed presentation on Water Safety Planning at the ESAWAS 10 th AGM, at their request. ESAWAS gave presentations on the regional benchmarking report at the African Water Association (AfWA) Congress in Kenya and the International Water Association (IWA) Congress in Australia. A request for partnership in capacity building was received from Shepperd&Wedderburn of Scotland who were invited to present at the 10 th AGM for consideration of the nature of partnership proposed. OBJECTIVE 3: IMPROVE OPERATIONS OF ESAWAS REGULATORS ASSOCIATION Focus Area Performance Hold Annual General The 10 th AGM was held in Dar es Salaam, Tanzania from 1 st -4 th Meeting (AGM) November, 2016 under the theme Regulating for the Future Incorporating Sustainable Development Goals (SDGs). The AGM drew over 70 participants from about eleven different countries. Update Website Increase membership Source external funds for activities The website was updated periodically with activities undertaken by ESAWAS. ZURA of Zanzibar became the 8 th Member of ESAWAS at the 10 th AGM. Out of a budget of US$52,000 to be sourced from external support, about 85% was secured through direct support for activities such as Peer Review, AGM, Technical Exchange Meeting and publication of benchmarking report. 5

13 CHAPTER 2. REGIONAL BENCHMARKING FRAMEWORK 2.1 RATIONALE FOR REGIONAL BENCHMARKING Benchmarking is a key regulatory tool for assessing and improving the performance of WSS Utilities by comparing the performance of a Utility against itself from past trends, against others and against good practice. However, in the Eastern and Southern African region, the largest Utility tends to have no peers while some countries only have a single WSS provider, thus making reasonable comparison of performance difficult. In order to design appropriate performance incentives and set minimum targets for key indicators, regulators need to establish where a Utility is coming from (past trends), how it has performed against others (comparative performance) and how it has performed against good practice (acceptable performance). Hence for large or single Utilities that have no comparable peer within a country, regional benchmarking becomes an essential tool to gauge and incentivise performance improvements. While the operating environments may differ from country to country, by benchmarking against similar sized Utilities, lessons can be drawn, by both the regulator and the utility, on how to improve performance. In cognisance of the foregoing, in 2015, ESAWAS developed a regional benchmarking framework by a process of harmonising the Key Performance Indicators (KPIs) and benchmarks used by the different regulators. Key benchmarks to be achieved by Utilities have been set in the respective Minimum Service Level guideline /Quality of Supply and Service Standards (QoSSS) developed by the regulators (see Annex 1). EWURA has set a Service Level Benchmark based on good practices while CRA utilises boundaries set under its indexing model. RURA, WASREB and NWASCO have defined an acceptable benchmark to be achieved. LEWA, AREEM and ZURA being relatively new, are yet to establish benchmarks for the KPIs. The regional benchmarking report therefore presents the platform by which large Utilities can be compared to similar sized Utilities within the region. The results of the benchmarking exercise are therefore intended to serve as a support tool to: foster improvement in the WSS services by creating competition among the benchmarked Utilities; identify strengths and weakness within the Utilities and areas for improvements; generate information for decision making; and contribute to the attainment of targets with respect to country visions and SDGs. 6

14 2.2 BENCHMARKING TOOLS For the purpose of regional benchmarking, ESAWAS combines the use of the International Benchmarking Network (IBNET) tool developed by the World Bank with the Water Utility Performance Index (WUPI) developed by CRA as described hereunder. IBNET: The IBNET Toolkit provides a set of financial, technical and process indicators (mainly capturing the institutional context in which the Utilities are operating) for the assessment of utility performance in the provision of water and sewerage services. This set of indicators provides the basis for cross-utility and cross-country comparisons. IBNET caters for a large number of indicators in different categories such Service Coverage, Non-Revenue Water, Quality of Service, Cost and Staffing and Financial Performance, amongst others. WUPI: Analysing single KPIs individually is a useful way to analyse the performance of a utility at technical level. However, by only using single KPIs in the performance analysis, it is difficult to conduct an integrated evaluation of the overall performance of the Utilities in closely related indicators. Thus the WUPI is a composite indicator to evaluate the performance of the Utilities in an integrated way for a set of similar indicators (see Annex 3 for a detailed description). 2.3 BENCHMARKING KPIs Ten KPIs are used for regional benchmarking as follows: i. Water Coverage ii. Sewerage Coverage iii. Water Quality iv. Hours of Supply v. Non-Revenue Water vi. Operational and Maintenance (O&M) Cost Coverage vii. Collection Efficiency viii. Metering Ratio ix. Staff per 1,000 Connections x. Staff Cost as a proportion of O&M Costs The indicators are grouped into three main components namely, a) Quality of Service- relating to the extent and assurance of the service; b) Economic Efficiency - relating to the viability of the service provider; and c) Operational Sustainability relating to operational efficiencies. 7

15 Performance boundaries for regional benchmarking were defined by considering the minimum average performance of the Utilities, as well as the minimum for the acceptable benchmark among the countries. The weights were arrived at by a process of normalisation of the various weights defined by the different regulators. Table 3 shows the framework used for regional benchmarking. 8

16 Table 3: Regional Benchmarking KPIs and Performance Measurements INDICATOR DEFINITION CALCULATION ACCEPTABLE BOUNDARIES QUALITY OF SERVICE 1 2 Water Coverage Sewerage Coverage 3 Water Quality Residual Cl (w0.4) Bacteriological (w0.6) 4 Hours of Supply ECONOMIC EFFICIENCY 5 O&M Cost Coverage by Billing 6 Collection Efficiency 7 Staff Cost % of total population with access to improved water supply: individual household connection, kiosk, public standposts, communal/shared tap % of total population with access to sewerage services (no septic tanks) % of water samples undertaken meeting quality requirements Aggregated average hours of supply (per town/zone/area etc) in the reporting period The level of costs covered by billed amounts The collected amounts from the billing Personnel Cost as a proportion of O&M cost OPERATIONAL SUSTAINABILITY 8 Staff/1000 Connections Staff per 1,000 water & sewerage connections 9 10 NRW Metering Ratio Water that does not produce revenue in a given period The proportion of metered customers from the total [Total Population Served/Total Population in the Service Area] [Total Population Served/Total Population in the Service Area] % of tests compliant in relation to applicable / national standards WEIGHT 75-90% % % 15 Sum of weighted averages per town [Billed Amount/O&M Costs] % 10 [Collected amount/billed amount]x % 15 [Personnel Cost/ O&M Costs ]* % 5 [Total Number of Staff x 1,000]/[No. of Water + Sewerage Connections] [System Input Volume (imported + produced) billed Volume]/System Input Volume [Functional Metered Connections]/Total Connections]x % % 10 9

17 CHAPTER 3. PERFORMANCE ANALYSIS The regional benchmarking exercise is not restricted to the members of the ESAWAS Regulators Association due to the value generated from the exercise. Therefore any country in the Eastern and Southern African region can participate in the exercise in order to have a comparative view of the performance of a Utility. It is worth noting that the ESAWAS regional benchmarking framework can also be used by individual regulators to further compare the performance of more Utilities in the country against other Utilities in the region and thereby draw comprehensive conclusions regarding the performance of the local Utilities. In the 2015/16 period, eight Utilities participated in the exercise from Kenya, Tanzania, Zambia, Mozambique, Rwanda, Lesotho, Uganda and Zanzibar. Uganda does not yet have an autonomous regulator but was able to participate through the Water Utility Regulation Department (WURD) under the Ministry of Water and Environment. This section focuses on the analysis of the performance of the eight Utilities. 3.1 REPORTING PERIOD In conformity with country requirements, the regulators have different reporting periods as follows: July-June for WASREB, RURA, EWURA, WURD and ZURA April- March for LEWA January December for NWASCO and CRA Hence the data used in this report is drawn from the respective reporting period as applicable. 3.2 OVERVIEW OF BENCHMARKED UTILITIES Only the largest or single Utilities in each country were selected for benchmarking. These are: Nairobi City Water and Sewerage Company (NCW&SC) of Kenya; Dar Es Salaam Water and Sewerage Corporation (DAWASCO) of Tanzania; Lusaka Water and Sewerage Company (LWSC) of Zambia; Águas da Região de Maputo (AdeM) of Mozambique; Water and Sanitation Corporation Ltd (WASAC) of Rwanda; Water and Sewerage Company (WASCO) of Lesotho, National Water and Sewerage Corporation (NWSC) of Uganda and Zanzibar Water Authority (ZAWA) of Zanzibar. 10

18 The general profile about the Utilities is shown in Table 4, while a detailed profile is presented in Annex 2. All the Utilities are publicly owned companies. Table 4: General Profile of Benchmarked Utilities Lusaka Water and Sewerage Company Águas da Região de Maputo Utility Abbreviation Country Areas of operation Nairobi City Water and Sewerage Company Dar Es Salaam Water and Sewerage Corporation LWSC Zambia Lusaka city; Kafue; Chongwe; Luangwa; Chilanga Year Established 1989 AdeM Mozambique Greater Maputo City 1999 NCW&SC Kenya City of Nairobi 2003 DAWASCO Tanzania Dar Es Salaam city; Kibaha; Bagamoyo; 2005 Water and Sewerage Company Water and Sanitation Corporation National Water and Sewerage Corporation WASCO WASAC Lesotho Rwanda Maseru + 15 urban centres Kigali + all urban centres in the country NWSC Uganda Kampala towns 1972 Zanzibar Water Authority ZAWA Zanzibar Zanzibar 2006 The oldest water Utility is NWSC, Uganda having been established in 1972 to operate in three major towns. A revision of the law in 1995 saw an extension of the mandate of NWSC to cover more towns. LWSC, Zambia was established in 1989 for the sole purpose of providing services to the capital city, Lusaka. However, in 2008 the mandate of the Utility was extended to cover the entire Lusaka Province. WASAC, Rwanda has been in existence since 1976 operating as ELECTROGAZ until 2010 when the national parastatals charged with water and electricity distribution were merged into the Energy, Water and Sanitation Authority. The 2010 law was repealed in 2014 to split the functions of electricity and water, and hence the establishment of WASAC. The rest of the Utilities have maintained the same mandate as at the time of their establishment. 11

19 The key background data about the Utilities is shown in Table 5. Table 5: Key background data on Benchmarked Utilities Utility NCW&SC, Kenya LWSC, Zambia DAWASCO, Tanzania AdeM, Mozambique WASCO, Lesotho WASAC, Rwanda NWSC, Uganda ZAWA, Zanzibar Population in the Service Area 2014/15 Number of Water Connections 2014/15 Annual Water Production (m 3 /yr) 2014/15 Population in the Service Area 2015/16 Number of Water Connections 2015/16 Annual Water Production (m 3 /yr) 2015/ Million 312, ,861, Million 333, ,352, Million 94,184 80,564, Million 97,008 84,330, Million 142,960 88,367, Million 156, ,982, Million 245,180 75,828, Million 255,202 73,151, Million 85,131 18,748, Million 90,544 23,858, Million 156,618 41,061, Million 175,646 42,187, Million 418,031 96,415, Million 472, ,775, Million 82,641 40,000, Million 85,525 60,000,000 From Table 5, NWSC had the largest population in its service area while WASCO had the smallest. NCW&SC still had the highest volume of water produced, more than double of any of the Utilities. NWSC had the highest number of connections while ZAWA had the least. DAWASCO had a significant increase in production, due to expansion of the lower Ruvu plant resulting in an 18% increase in volume of water produced per day. AdeM suffered a drop in production due to the continued drying of the Maputo dam as a consequence of a three-year drought, which further led to water rationing. 12

20 3.3 PERFORMANCE BOUNDARIES In order to obtain an integrated view of the Utilities performance, benchmarking has been done using both single KPIs and composite indicators as defined under the WUPI. The single KPIs (using traffic light colours) and components for grouped indicators are shown in Table 6. The KPIs boundaries established by ESAWAS are constrained to the current scenario and could be revisited in the following years if the trends shift. Table 6: KPIs and Performance boundaries Component KPI Good Acceptable Poor Water Coverage > < 75 Quality of Service Sewerage Coverage > < 40 Water Quality > < 90 Hours of Supply > < 16 O&M Coverage > < 100 Economic Efficiency Operational Sustainability Collection Efficiency > < 85 Staff Cost < >35 Staff/1,000 Water and Sewerage Connections < >8.0 NRW < >35 Metering Ratio > < PERFORMANCE ANALYSIS The performance analysis was done according to the clusters of indicators in the components of i. Quality of Service ii. iii. Economic Efficiency Operational Sustainability Per component of indicators, the performance results by single KPIs are presented first, then the performance is analysed using the WUPI, which integrates the single KPIs. 13

21 3.4.1 QUALITY OF SERVICE The quality of service is measured using four KPIs: water supply coverage, sewerage coverage, water quality and hours of water supply Water Supply Service Coverage Water supply coverage considers the domestic population served through individual household connections, public standpipes and water kiosks. Table 7 shows the number of domestic water connections per Utility. All Utilities increased connections with the highest additions recorded by NWSC and WASAC. For NWSC, the increase was partly as a result of the transfer of several small piped water systems to its jurisdiction. Table 7: Domestic Water Connections Utility Domestic Connections 2014/15 Domestic Connections 2015/16 NCWSC 307, ,629 LWSC 85,280 89,042 DAWASCO 137, ,778 AdeM 236, ,965 WASCO 66,683 76,442 WASAC 150, ,123 NWSC 337, ,874 ZAWA 81,496 82,971 Chart 1 shows that the average water supply service coverage remained the same and marginally below the acceptable benchmark of 75%. 14

22 NCW&SC, LWSC, NWSC and ZAWA met the acceptable benchmark. WASAC progressed to meet the good benchmark of 90% through the introduction of a performance award for exceeding quarterly targets for new connections that saw a significant jump in connections added. DAWASCO and WASCO recorded a drop in coverage. For DAWASCO, following a regulatory study, the people served by water bowsers that were previously reported as covered were removed from the calculation. For WASCO, the rate of population growth was higher compared to the increase in persons served Sewerage Service Coverage Mozambique and Rwanda have separate entities for sewerage and sanitation services 1, hence only NCW&SC, LWSC, DAWASCO, WASCO, NWSC and ZAWA which provide sewerage services, were analysed. Due to the unreliability of data regarding septic tanks, only the sewerage services by network were considered. The number of sewerage connections are shown in Table 8 while service coverage is depicted in Chart 2. Table 8: Sewerage Connections per Utility Utility Sewerage Connections 2014/15 Sewerage Connections 2015/16 NCW&SC 208, ,998 LWSC 31,388 32,137 DAWASCO 18,568 18,643 WASCO 6,593 7,165 NWSC 19,303 20,355 ZAWA 3,000 3,000 Apart from NCW&SC which had a significant increase in connections after commissioning a project for bulk sewer systems, the rest of the Utilities recorded minor additions of sewerage connections. The apparent increase for WASCO was from a data verification exercise that saw the inclusion of pre-paid customers that were sewered but previously left out. 1 Sewage regulatory activity for Maputo city has not yet been established as negotiations with the City Council (entity responsible for the Sewage) still underway. According to the Department of Water and Sanitation of the Maputo Municipal Council, the sewerage coverage in the city is around 11%. Kigali does not have a centralised sewer system and the private operator providing sewer services is not under regulation 15

23 Chart 2 shows a dismal picture of sewerage service coverage by network at an average of 16% which was far below the acceptable benchmark of 40%. Only NCW&SC maintained coverage above the acceptable benchmark. The low sewer service coverage figures in most Utilities imply that the majority of the population are either served through septic tanks or a form of onsite sanitation. This underscores the urgent and critical need for investment in sewerage infrastructure in order to ensure the safe management of faecal matter and wastewater that can pose a serious risk to public health and the environment. In addition, this calls for increased public awareness on the need to connect to a centralised system (particularly in densely populated urban areas) as opposed to the use of improperly designed and located septic tanks that could cause groundwater pollution Water Quality Drinking water quality measures the potability of water supplied by a Utility. It is a critical performance indicator since it has a direct impact on the health of consumers. However, individual countries have different standards for water quality in conformity with the national standards. Therefore, the drinking water quality result presented in Chart 3 is a composite indicator considering compliance in the parameters of Residual Chlorine (40%) and Bacteriological (60%) in terms of number of tests carried out against the required and number of tests meeting the respective national standards. 16

24 Chart 3 shows that the average water quality compliance improved to 93%, above the acceptable benchmark of 90%. Apart from ZAWA, all the Utilities met the good benchmark of 95%. NCW&SC and DAWASCO that were previously below the acceptable benchmark, improved compliance to standards and to the required number of tests, respectively. ZAWA dropped even further below the acceptable benchmark due to lower compliance to the national standards. It must be noted that the regulator, ZURA, does not yet have a guideline for required number of tests Hours of Water Supply Hours of Supply refers to the average number of hours per day that a Utility provides water to its customers. It measures the continuity of services of a Utility and thus the availability of water to the customer. It is an important indicator of quality of service and shows the extent to which the Utility is making progress towards the fulfilment of the human right to water and sanitation in terms of availability of water in sufficient quantities. The average hours of supply improved slightly by 1 hour and above the minimum acceptable benchmark of 16 hours as shown in Chart 4. 17

25 Apart from AdeM and WASAC, the rest of the Utilities were above the minimum acceptable benchmark. However, only DAWASCO and WASAC recorded significant improvements in hours of supply. For DAWASCO, the improvement was attributed to the increase in water production by 18% coupled with reduced NRW from 56% to 53% while domestic connections only increased by 9%. For WASAC, the improvement was due to an increase in production volume by 25,000m 3 /day in Kigali, in addition to a change in the rationing programme to boost hours supplied to some areas that had lower supply and reduced hours to areas that had very high supply. Reduced borehole yields in the dry seasons and sustained electricity load shedding continued to hamper improvements in hours of supply for LWSC. Similarly, AdeM faced challenges of reduced production due to the continued drying of the Maputo Dam. Nairobi, Lusaka and Maputo are in urgent need of investment to increase production volumes which are far below the demand. 18

26 Integrated Performance - Quality of Services The integrated performance for the WUPI-Quality of Services shown in Chart 5 was measured by using the Water Supply Coverage, Sewerage Coverage, Water Quality and Hours of Supply indicators. WASAC maintained the best performance in the WUPI-Quality of Services, largely driven by good performance in water supply coverage and water quality compliance. NCW&SC showed improved performance from 26.2% in the previous period and ranked second from 5 th position, owing to the improvement in water quality compliance. Equally, DAWASCO leaped in performance from bottom with 0% in the previous period as a result of improvements in water quality compliance and hours of supply. LWSC, WASCO and AdeM maintained the same performance levels but dropped in the rankings. NWSC as a new entrant performed reasonably well on the ranking while ZAWA trailed bottom. 19

27 ECONOMIC EFFICIENCY According to the IMF Regional Economic Outlook: Sub-Saharan Africa, 2016 was a difficult year for many countries, with regional growth dipping to 1.4%- the lowest level of growth in more than two decades. Commodity prices increased and exchange rates depreciated. Countries affected by slow economic growth included Zambia, Mozambique, Lesotho, Rwanda and Uganda. However, countries like Kenya and Tanzania generally maintained high growth rates. The Economic Efficiency performance was analysed using three KPIs: Operation and Maintenance (O&M) Cost Coverage by Billing, Collection Efficiency ratio and Staff Cost as a proportion of O&M Costs Comparison of Residential Water Bill and Cost of Connection A water bill is a charge made for the usage of water at a particular property. A comparison of water bills charged by the different Utilities for the same volume of water was done in order to demonstrate the average amount spent by a customer on water usage only. Hence the comparison does not include fixed or sewer charges. The comparison of a residential water bill in Table 9 is made using three criteria: (i) a lifeline or pro-poor consumption of 5m 3 which is usually subsidised; (ii) a bill for 30m 3 which tends to be an average consumption for domestic customers; and (iii) an average domestic bill for a Utility. Table 9: Comparison of Residential Water Bill and Cost of Connection Utility Lifeline Consumption at 5m 3 ($) Bill at 30m 3 ($) Average domestic bill ($) Average Cost of Domestic Connection ($) NCW&SC LWSC DAWASCO AdeM WASCO WASAC NWSC ZAWA Not Available From Table 9, NWSC had the highest charge for the lifeline consumption bill while ZAWA, LWSC and NCW&SC charged less than or about US$2. However, for the bill at 30m 3, WASCO and LWSC charged the highest and least, respectively. 20

28 The average domestic bill for all Utilities was less than 30m 3 indicating that the average water consumption from the Utilities is less than 30m 3 per month. For AdeM, WASCO, WASAC, NWSC and ZAWA, the average domestic bill is closer to the lifeline consumption. This should prompt the Utilities to review the design of the tariff structure. The cost of a water connection can act as a barrier to access. Regulators and Utilities must thus endeavour to ensure that this cost is not prohibitive to customers while balancing the commercial aspect of the business. The cost of a new connection is generally based on the materials required in relation to the distance from the mains. NCW&SC offered the least charge for a new connection Operation and Maintenance Cost Coverage by Billing Operation and Maintenance (O&M) Cost Coverage in Chart 6 is the extent to which internally generated funds through billing for water and sewerage services, cover the cost of running a utility. It is a measure of the financial sustainability of a Utility. A Utility is said to have reached full cost coverage when it reaches above 150% O&M Cost Coverage. At this level a Utility is able to meet its O&M costs and undertake capital development. In the reporting period, the average O&M Cost Coverage by Billing improved to 118%, above the minimum acceptable benchmark of 100%. NCW&SC and ZAWA were the only Utilities below the acceptable benchmark. The improvements by DAWASCO, LWSC, AdeM, WASAC and NWSC were due to a higher increase in revenue compared to the increase in costs 21

29 Collection Efficiency Collection Efficiency in Chart 7 shows the level of cash income in the Utility against the billed amounts for water and sewerage services only. Collection ratios above 85% are a key factor in sustaining financial performance of water and sewerage services Utilities, both in the short and medium term. The average Collection Efficiency ratio dropped to 83%, below the minimum acceptable benchmark of 85%. AdeM was above the acceptable benchmark while NCW&SC, WASAC and NWSC met the good benchmark of 95%. Four Utilities, LWSC, DAWASCO, WASCO and ZAWA were below the acceptable benchmark. LWSC experienced a drop in collection efficiency due to delayed payment of bills by Government institutions, which are major customers. The collection efficiency for ZAWA was critically low indicating either customer dissatisfaction with the service or resistance of customers to pay for services that were, until recently, free Staff Cost as a proportion of O&M Costs The staff cost is analysed against the O&M costs of the utility and presented in Chart 8. The internationally accepted bottom line for the staff cost is 30% of the total cost. To put the cost proportion in perspective, the number of staff per Utility is shown in Table

30 Table 10: Total Staff per Utility Utility Total Staff 2014/15 Total Staff 2015/16 NCW&SC 2,948 3,506 LWSC DAWASCO AdeM WASCO WASAC NWSC 2,752 2,860 ZAWA NCW&SC and NWSC had the highest complement of staff, at three times more than any of the other Utilities. The average proportion for staff costs against O&M costs dropped even further below the minimum acceptable benchmark of 35%. NCW&SC and LWSC had unacceptably high proportions of staff costs. NCW&SC recruited 558 additional staff against regulatory advice and tariff conditions, leading to a drop in O&M Cost coverage. For LWSC and DAWASCO, the staff costs increased significantly despite a reduction in the overall O&M costs. 23

31 Integrated Performance Economic Efficiency The WUPI-economic efficiency as shown in Chart 9 was used to obtain an integrated view of the Utilities performance in the three KPIs of Operation and Maintenance (O&M) Cost Coverage by Billing, Collection Efficiency ratio and Staff Cost as a proportion of O&M Costs. WASAC improved its ranking from 3 rd to 1 st position with a strong performance in the Economic Efficiency component. This is evident by the good performance in all three KPIs. NCW&SC also improved its ranking from second-last to 4 th position as a result of improved collection efficiency. DAWASCO dropped from 1 st to 5 th position while WASCO continued to trail bottom due to a decline in performance in Collection Efficiency ratio and Staff Cost as a proportion of O&M Costs. 24

32 3.4.3 OPERATIONAL SUSTAINABILITY The Operational Sustainability component is measured using Staff per 1,000 Water and Sewer Connections, Non-Revenue Water and Metering ratio Staff per 1,000 Water and Sewer Connections Staff per 1,000 Water and Sewer Connections, shown in Chart 10, indicates the number of employees servicing 1,000 connections. It measures the efficiency of Utilities in utilising their staff and hence a low figure is desirable. However this measure is affected by factors such as nature of human settlement, skills mix, Utility business model (outsourcing), geographical distributions of areas served and where a Utility provides water alone or water and sewerage connections. The average for Staff per 1,000 Connections improved further below the minimum acceptable benchmark of 8. All Utilities met the acceptable benchmark while AdeM and WASAC met the good benchmark. The performance for NCW&SC declined due to the undesirable increase in staff despite an increase in connections. ZAWA met the benchmark due to a reduction of staff against an increase in connections. 25

33 Metering ratio Metering ratio is the proportion of metered connections compared to the total connections. Metering is closely linked to the management of water losses as it measures the volume of water consumed by customers. The average metering ratio improved to 81% but was still below the minimum acceptable benchmark of 85%. Five Utilities met the good benchmark of 95%. DAWASCO made laudable efforts to improve metering ratio almost to 100%. LWSC, AdeM and ZAWA remained below the acceptable benchmark. LWSC experienced a drop in metering ratio as a result of a high failure of postpaid and prepaid meters in a number of branches due to a combination of factors ranging from technology to management. From the meters procured in the year, about 5,234 meters went to replacements of faulty ones while 7,289 were new meter installations. In addition, 4,228 faulty meters could not be repaired and were removed from the system. The low metering ratio for ZAWA was of grave concern. This means that the premise of the business for production and consumption are significantly based on estimates and could lead to a poorly designed tariff and management of water losses. There is urgent need for investment to improve the metering ratio. 26

34 Water Losses Non-Revenue Water is water that has been placed in the distribution system but lost before reaching the customer, that is, water produced but not sold. It measures the efficiency of a Utility in delivering the water it produces to customers take-off points. It is made up of technical losses (leakages), commercial losses (illegal connections/water theft, metering errors and unbilled authorised consumption. Water losses imply revenue loss and becomes a key area for Utilities to address urgently. As shown in Chart 12, the average NRW worsened to 43.3%, way above the minimum acceptable benchmark of 35%. Only NWSC met the good benchmark of less than 30%. The rest of the Utilities did not meet the acceptable benchmark. DAWASCO improved its NRW following an increase in metering ratio and undertook a study in two areas to reduce NRW by introduction of district /zone meters and replacing meters more than five years old. WASCO experienced increased water losses due to numerous pipe bursts after increasing production because of a dilapidated porous network. Further, as a result of a drought, some of the main lines were vandalised by villages along the route. However there are different perspectives as to the most appropriate measure of NRW. A percentage approach can make Utilities with high levels of consumption, or compact networks, look to be better performing than those with low levels of consumption or extensive networks. 27